Picturesque, sunlit harbourside Sydney has proved irresistible to filmmakers as diverse as Bryan Singer (Superman Returns), the Wachowski Brothers (the Matrixtrilogy) and John Woo (Mission Impossible II). If Carlo Ledesma can promise one thing, it's that when The Tunnel premieres at the Night of Horror Film Festival, cinemagoers will see parts of the city never before captured on film.

“There's an actual artificial lake under the St James train station [in Sydney's CBD],” says Ledesma. “It's like there is a whole city under Sydney itself, just a maze of these abandoned tunnels. Some were used during World War II as air-raid shelters; there are still some bathrooms down there. This was meant to be a place where people could live.”

Producers Enzo Tedeschi and Julian Harvey conceived of their first-person, shaky-cam film after reading a newspaper article about the enormous network of dark passageways beneath Sydney. In The Tunnel, a news crew explores the subterranean caverns and becomes the subject of its own story. For Tedeschi, the experience of shooting in such a dank, dusty, dark location mirrored the experience of the actors and infused the on set dynamic with a unique camaraderie.

“The fact that we were shooting as if the crew in the story were shooting, it meant that we could only use the light and gear that they would have had with them – very little,” Tedeschi recalls. “We eliminated lengthy lighting setups and big cameras by doing that. Then we chose locations that looked amazing already, so we took out a lot of the time that would have been necessary for set design and dressing as well.”

Ledesma concurs: “None of us were interested in shooting in fake locations. Jules (Harvey), in particular; he's our resident tunnel rat. He really went out of his way to get the permits and do all the location scouting. We didn't want to do any green-screen or anything in a studio.”

Nevertheless, the production's commitment to authenticity made for some bare-boned filmmaking. “We had no budget,” Tedeschi admits, “nor were we allowed to bring in generators, so I pretty much had to direct by torchlight. I mean literally, with a torch strapped to my head. It was underground filmmaking in every sense.”

Tedeschi, who graduated to feature producer after working for many years on shorts and documentaries, wouldn't have had it any other way. “It's the perfect start in our case. We literally were able to rock up, walk in, block the scenes with the actors and start shooting. Saving time is saving money.”

The mention of money leads the conversation into the most unique aspect of The Tunnel's production: the funding model that would become known as 'The 135K Project'. Tedeschi and Harvey bypassed the usual funding bodies to independently finance their film by selling frames of the movie for $1 each, to reach the projected budget level of $135,000. As the producers explain on their website, “The owner of that frame will get a 1% share in any money we make from the movie.”

When asked to elaborate on the inspiration for the budgeting structure, Tedeschi deadpans, “Korean BBQ and Star Wars. Julian and I were at dinner one night and we started discussing a piece of movie memorabilia I was given as a gift: a 35mm frame of Star Wars. We started doing the maths and realised how many of those frames they could sell off each print of the movie. Then the light bulb went off.”

The concept demanded a major rethink of the distribution model that The Tunnel would later utilise. Following its festival premiere, the film will be marketed virally and freely distributed online; if you like the film, buy some frames to help the production turn a profit. (An eventual DVD release is planned).

The producers understand it is a risky undertaking. “We haven't raised our full budget yet, even though we raised enough to get things rolling,” reveals Tedeschi. (At time of writing, the website states 32,264 frames have been sold.) “We need $135,000 to pay for everything. Once that's raised, we can start calling it a profit.”

The production team is confident that the unforgiving world of internet downloading can be tamed and used for profit-making instead of pirating. “The closer we get to the film's release date, the frame sales have been picking up again,” Ledesma says. “We hope that in exchange for what we are doing – sharing our film with the world via the internet – people will show their appreciation by downloading the torrent and buying the frames or the merchandise or the DVD.”